Unemployed: Out of Luck, Out of Health Care

Yvonne Brustad said it was devastating enough to lose her job in September, but on top of that she lost the health insurance that came with it.

Her husband, too, was suddenly without coverage. He is self-employed and relied on her health insurance plan.

The Minnesota couple is now insured once again, but at a staggering cost. Through a federal law called COBRA that allows laid-off workers to continue with their employee-provided health insurance, Brustad pays a whopping $1,200 per month for health benefits. But she collects only $1,612 per month in unemployment benefits, meaning 75 percent of her unemployment check goes to health insurance for her and her husband.

A new study released Thursday shows her experience is hardly unique, exposing major holes in a system that's supposed to be a health care lifeline for uninsured workers.

The report, by the health care advocacy group Families USA, shows why most of those who lose their jobs simply can't afford to take advantage of COBRA coverage.

"I think it's horrible," Brustad said. "It's cleaning me out. Yeah, we have a roof over our head and we're managing to eat, but how much longer if I have to come up with funds to pay for health insurance? I feel like I'm caught between a rock and a hard place."

Brustad is using savings to stay afloat.

"At least I had a few thousand dollars put away," Brustad said. "Think of those who don't."

Under COBRA, which stands for the Consolidated Omnibus Budget Reconciliation Act of 1985, people can stay on their employee-provided health insurance for up to 18 months after losing a job. The employee has to pick up the entire cost of the health care premiums -- both the portion they paid before, as well as the portion that was covered by their employer.

Families USA found that workers nationwide would have to spend an average of 30 percent of their unemployment check to pay for insurance coverage for an individual, and an astonishing 84 percent of their unemployment check for health insurance for a family.

"COBRA, from an academic standpoint, sounds like a wonderful remedy," said Families USA Executive Director Ron Pollack. "But from a practical standpoint, it is a ruse."

COBRA Premiums: Affording Job Loss and Health Coverage

The study found that in nine states, the average COBRA premiums for family coverage actually exceed the average unemployment insurance benefit. In Arizona, for example, the average monthly unemployment check is $937, and family COBRA coverage runs $1,084.

Four out of five people who are eligible for COBRA do not take advantage of it, according to the Kaiser Family Foundation and Health Research and Educational Trust.

There is now a push to use President-elect Obama's economic stimulus plan to offer help to cover COBRA costs.

America's Health Insurance Plans, an industry trade association, has called for a subsidy to help pay for COBRA coverage. Families USA agrees that a "substantial subsidy" would be one way to go.

The other option, the groups said, is to allow unemployed workers to temporarily obtain health coverage through Medicaid, with the federal government picking up the extra Medicaid costs.

Pollack said such ideas are "likely to be controversial," but he believes one or both of them are "likely to be in the final stimulus package."

For now, though, Brustad and others like her are forced to struggle on their own.

Brustad said she and her husband may only be able to continue to pay for health care for another month or so, adding that, over the years she had read about people losing their health insurance and thought, "it's that awful."

Now, she said, "It is me."

"We can't say, 'If you don't have a job or earn enough you are not entitled to health care,'" she said. "You just can't say those things to people anymore."